Abstract
Among the founders of family firms, succession is the greatest challenge to long-term success. According to The Family Firm Institute (n.d.), only about 30% of family businesses survive into the second generation, 12% are still viable into the third generation, and only about 3% of all family businesses operate into the fourth generation or beyond. In contrast to Western countries, the sustainable development of family-owned enterprises within Chinese society must rely on the operation of enterprises. Succession, being inevitable, can reduce the value of a company. This study sought to identify the appropriate succession plan to maintain business value and family’s wealth. The main purpose of this study is to discuss the relationship between a family’s succession, the successor, and firm performance. The sample is comprised of listed firms in Taiwan with necessary data from the Taiwan Economic Journal Database (TEJ). The period extends from 1996 till 2016. Securities, financial firms, and other elements of incomplete information are excluded from the sample. The research sample including 1,286 firms and 13,849 firm-year data, 2,918 of which indicate succession issues. This study employed regression model and investigated the relationships between family succession, the successor, and corporate performance. The main findings indicate that succession negatively influences corporate performance. However, an internal successor is better than an external one, and children successors are better than other relatives.
Highlights
According to the Liberty Times Net 2015 Chinese Family Firms Survey, the average age of a family firm in Taiwan is 30 years, the founder is 61 years old on average, 43% are succession enterprises, and the average tenure of the founder is 17.8 years, which is higher than that of China and Hong Kong
This study focuses on management succession in which the successor types will be categorized as children, external executives, and other relatives
The main findings are as follows: (1) succession negatively influences corporate performance, (2) internal succession is better than external succession, and children successors bring greater success than other relatives
Summary
According to the Liberty Times Net 2015 Chinese Family Firms Survey, the average age of a family firm in Taiwan is 30 years, the founder is 61 years old on average, 43% are succession enterprises, and the average tenure of the founder is 17.8 years, which is higher than that of China and Hong Kong. Many founders of family firms in Taiwan have retired or passed away Some enterprises, such as Formosa Plastics Group, have formed succession plans early on; others have experienced a series of conflicts after the founder passed away, e.g., Evergreen Group. Succession involves a series of complex processes, influenced by family structure, transfer of wealth and power, change of management style, harmony of family members, different values and beliefs, and training, all of which affect corporate performance (Ghee, Ibrahim, & Abdul-Halim, 2015). This study focuses on management succession in which the successor types will be categorized as children, external executives, and other relatives. The main findings are as follows: (1) succession negatively influences corporate performance, (2) internal succession is better than external succession, and children successors bring greater success than other relatives
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